A top UN atomic watchdog official was holding fresh talks on Iran's nuclear drive on Monday, just a day after Tehran announced it sent a rocket into space in a move Washington branded "troubling."

Olli Heinonen, deputy director general of the International Atomic Energy Agency (IAEA), arrived in Tehran for his second round of talks this month, the official news agency IRNA reported.

Heinonon has made a number of visits as part of the agency's longstanding efforts to ensure there is no military dimension to the nuclear drive, which some Western states fear could be a cover for a secret weapons project.

His trip, which comes ahead of a new IAEA report on Iran expected in September, follows up on August 7 talks in Tehran that Iranian officials described as "positive" but without giving details.

On Sunday, Iran announced it had fired into space a rocket carrying a dummy satellite, a launch likely to further exacerbate tensions with the West over its nuclear work.

Defence Minister Mostafa Mohammad Najjar also vowed that Iran will soon put its own satellite into orbit.

State television said the Safir (Ambassador) rocket is capable of putting a "light satellite into low earth orbit" between 250 and 500 kilometres (150 and 300 miles) above the earth.

Sunday's launch raised concern in Washington that the rocket technology could be diverted to military applications, with the White House calling the development "troubling."

"This action and dual use possibilities for their ballistic missile programme have been a subject of IAEA discussions and are inconsistent with their UN Security Council obligations," the White House said.

Iran's arch-foe Israel, which considers the Islamic republic its greatest threat, however played down concerns over the rocket launch.

Tehran "deliberately exaggerates its air and space successes in order to dissuade Israel or the United States from attacking its nuclear sites," said the head of Israel's space agency, Yitzhak Ben Israel.

"The threat posed by Iran comes from its nuclear programme and not from its satellites or ballistic missiles," he said.

Israel and its staunch ally the United States have never ruled out a military strike against Iran's nuclear sites, although currently Washington has said that for the moment it is pursuing the diplomatic option.

Iran risks a possible fourth round of UN sanctions after it failed to give a clear response to an incentives package offered by six major world powers in return for halting uranium enrichment, a process which makes nuclear fuel but also the core of an atomic bomb.

Heinonen, who is in Tehran at the invitation of the country's atomic energy organisation, is accompanied by another unnamed IAEA expert, IRNA said.

Since April, his visits have focused on studies which the IAEA suspects Iran has carried out in the past into the engineering involved in making a nuclear warhead.

In his last report on Iran in May, IAEA chief Mohamed ElBaradei accused the Islamic republic of withholding key information on the so-called weaponisation studies.

Iran dismissed the allegations as "baseless", insisting it had provided a comprehensive response.

ElBaradei is due to submit another report on Iran's nuclear programme and its cooperation with the IAEA in mid-September, before the next meeting of the agency's board of governors.

Tehran has already been slapped with three sets of UN sanctions over its failure to heed successive Security Council ultimatums to freeze uranium enrichment.

Iran has said it was ready to hold more talks with the European Union on the package offered by Britain, China, France, Germany, Russia and the United States.

The leading OPEC member, which is the world's fourth oil producer, insists however that its nuclear programme is aimed solely at generating energy for its growing population.